There are enough investment newsletters, analysts’ recommendations, and stock tips circulating to exhaust and confuse any investor. I’ve read so many ways to make money in stocks lists that I decided to view the other side of the equation. How about ways to lose money in the stock market? Thus, 10 ways to guarantee you’ll lose money in the stock market was born.
1. Do zero research on the company – Refuse to look up a single quote, balance sheet, or earnings estimate. Instead, base your entire reasoning on the length of the company’s name. Take a step further, and block access to financial websites on your computer. Only allow access to message boards so you can get stock tips to complement your six syllable stock picks.
2. Execute Market Trades – Why waste time by determining your own buy and sell prices? Just let supply and demand take its course. Give your broker the authority to execute the trade whenever it’s convenient for him or her. They’ll get the commission, while we can relax.
3. Buy High and Sell Low – Time your trades so you pay the market premium for stocks. On the flip side, sell your shares when no one wants to buy. When a stock begins to rebound, sell off your stake before you make any money.
4. Invest in companies facing bankruptcy – Even though the company can hardly pay its bills, be optimistic and invest in a glorious turnaround. Allow corporate management to use your stock as collateral in the bankruptcy courts. Then expect nothing in return but a pathetic court notice, and still wear a smile on your face.
5. Treat Proxy Statements and Annual Reports as spam – Dispose of annual reports and proxy statements as you would delete spam e-mails from your inbox. If they continue to come, change your home address to end future contact.
6. Invest in one sector – Ignore diversification, and put your money in one stock market sector. It’s easier to track, and although your risk is high, you hate following multiple stock market sectors. Pretending to follow just one is a lot easier.
7. Trade Penny Stocks – They’re cheap, and you shop for stocks like you shop for clothing in a thrift store. When searching for penny stock tips, you frequent message boards, and believe whatever stocktrader333 says.
8. Buy in one lump sum – Throw dollar cost averaging out the door, and go with lump sum trading instead. You buy or sell once, and that’s it. You almost always pay more the stock, but at least you avoided $8 in commission fees.
9. Invest in only domestic stocks – The growing international markets are complete hype, and you rather stick to domestic equities. You believe global diversification is unpatriotic.
10. Trade with fear – When stocks dip, you forgo rational thinking, and immediately sell. You’re extremely risk adverse, and would be better off placing your money in a savings account.